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Liquidity of a Stock Exchange, Between Investor Behavior and Scarcity of Securities: The Case Study of the West African Regional Stock Exchange

Received: 27 September 2019     Accepted: 4 November 2019     Published: 21 November 2019
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Abstract

Liquidity may be evident at first glance, as it is widely debated in the literature, but regarding the question on the threshold at which a stock market is liquid, the answers are far from being evident and unanimous. This paper studies the determinants of liquidity in the West African Regional Stock Exchange through the level of float and investors behavior based on a conceptual model. The model takes into account the specificities of a market governed by players’ orders and behaviors. We analysed the scarcity of stocks and the behaviors of players based on a case study and simulation methodology. We found that investors are passive in the market, which results in under-liquidity. It can be deduced that the market is savings driven. In addition, the average time that a stock market order finds a counterpart is three to seven days. This situation is due to the scarcity of securities and / or the inability of investors to intervene in the market in a timely manner. As a result, new entrants to the market will have difficulty in offering securities, due to a lack of sufficient liquidity. In conclusion, the market liquidity depends mainly on a minimum of auctioned securities rather than investor’s participation.

Published in International Journal of Business and Economics Research (Volume 8, Issue 6)
DOI 10.11648/j.ijber.20190806.19
Page(s) 389-398
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2019. Published by Science Publishing Group

Keywords

Liquidity, Behavior, Depth of the Market, Scarcity of Securities, Regional Stock Exchange

References
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Cite This Article
  • APA Style

    Pourakin Djarius Dieudonné Bama, Balibié Serge Auguste Bayala. (2019). Liquidity of a Stock Exchange, Between Investor Behavior and Scarcity of Securities: The Case Study of the West African Regional Stock Exchange. International Journal of Business and Economics Research, 8(6), 389-398. https://doi.org/10.11648/j.ijber.20190806.19

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    ACS Style

    Pourakin Djarius Dieudonné Bama; Balibié Serge Auguste Bayala. Liquidity of a Stock Exchange, Between Investor Behavior and Scarcity of Securities: The Case Study of the West African Regional Stock Exchange. Int. J. Bus. Econ. Res. 2019, 8(6), 389-398. doi: 10.11648/j.ijber.20190806.19

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    AMA Style

    Pourakin Djarius Dieudonné Bama, Balibié Serge Auguste Bayala. Liquidity of a Stock Exchange, Between Investor Behavior and Scarcity of Securities: The Case Study of the West African Regional Stock Exchange. Int J Bus Econ Res. 2019;8(6):389-398. doi: 10.11648/j.ijber.20190806.19

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  • @article{10.11648/j.ijber.20190806.19,
      author = {Pourakin Djarius Dieudonné Bama and Balibié Serge Auguste Bayala},
      title = {Liquidity of a Stock Exchange, Between Investor Behavior and Scarcity of Securities: The Case Study of the West African Regional Stock Exchange},
      journal = {International Journal of Business and Economics Research},
      volume = {8},
      number = {6},
      pages = {389-398},
      doi = {10.11648/j.ijber.20190806.19},
      url = {https://doi.org/10.11648/j.ijber.20190806.19},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijber.20190806.19},
      abstract = {Liquidity may be evident at first glance, as it is widely debated in the literature, but regarding the question on the threshold at which a stock market is liquid, the answers are far from being evident and unanimous. This paper studies the determinants of liquidity in the West African Regional Stock Exchange through the level of float and investors behavior based on a conceptual model. The model takes into account the specificities of a market governed by players’ orders and behaviors. We analysed the scarcity of stocks and the behaviors of players based on a case study and simulation methodology. We found that investors are passive in the market, which results in under-liquidity. It can be deduced that the market is savings driven. In addition, the average time that a stock market order finds a counterpart is three to seven days. This situation is due to the scarcity of securities and / or the inability of investors to intervene in the market in a timely manner. As a result, new entrants to the market will have difficulty in offering securities, due to a lack of sufficient liquidity. In conclusion, the market liquidity depends mainly on a minimum of auctioned securities rather than investor’s participation.},
     year = {2019}
    }
    

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    AU  - Pourakin Djarius Dieudonné Bama
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    Y1  - 2019/11/21
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    N1  - https://doi.org/10.11648/j.ijber.20190806.19
    DO  - 10.11648/j.ijber.20190806.19
    T2  - International Journal of Business and Economics Research
    JF  - International Journal of Business and Economics Research
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    AB  - Liquidity may be evident at first glance, as it is widely debated in the literature, but regarding the question on the threshold at which a stock market is liquid, the answers are far from being evident and unanimous. This paper studies the determinants of liquidity in the West African Regional Stock Exchange through the level of float and investors behavior based on a conceptual model. The model takes into account the specificities of a market governed by players’ orders and behaviors. We analysed the scarcity of stocks and the behaviors of players based on a case study and simulation methodology. We found that investors are passive in the market, which results in under-liquidity. It can be deduced that the market is savings driven. In addition, the average time that a stock market order finds a counterpart is three to seven days. This situation is due to the scarcity of securities and / or the inability of investors to intervene in the market in a timely manner. As a result, new entrants to the market will have difficulty in offering securities, due to a lack of sufficient liquidity. In conclusion, the market liquidity depends mainly on a minimum of auctioned securities rather than investor’s participation.
    VL  - 8
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Author Information
  • Department of Management, Ouaga II University, Faculty of Economics and Management Science, Ouagadougou-Burkina Faso, Ouagadougou, Burkina Faso

  • Department of Management, Ouaga II University, Faculty of Economics and Management Science, Ouagadougou-Burkina Faso, Centre Africain d’Etudes Supérieures en Gestion (CESAG), Dakar, Sénégal

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